… this time by effectively banning the online sale of non-prescription pharmaceuticals, according to Genri Goto, CEO of Kenko.com, Japan's largest online drugstore.
Japanese society and politics have long been run by the “iron triangle” of business, bureaucrats and politicians. Businesses are granted policy and regulatory favours. In return, businesses bankroll politicians and provide lucrative post-retirement jobs to bureaucrats (parachuting or “amakudari”). As you can imagine, this iron triangle does not like newcomers like e-commerce firms arriving on the scene, upsetting the applecart and providing new competition. This is one of the many things holding back Japan in its quest to join the 21st century.
According to Goto, in February 2009, Japan's Ministry of Health & Welfare announced new regulations which severely restricted the online “over-the-counter” sales of non-prescription pharmaceutical products. These are regulations which bureaucrats can draft without having to go through the law-making process of Japan’s parliament, the “Diet”. Goto even claims that these regulations were drafted by the Japan Association of Chain Drug Stores to stack the cards in their favour. These new regulations cite lack of face-to-face contact between consumers and "registered sales staff" as an inherent safety risk in online sales.
Goto seems to have a good argument. It is the story of a battle that pits the emerging digital economy against entrenched bricks-and-mortar interests and the government bureaucrats with whom they have cozy relations. It is also a battle between the past and the future. Since Japan has a good reputation for safe products and good service, online retailing of pharmaceuticals could become a good regional export industry for Japan (who would trust a Chinese online salesman?).
Goto is not a typical submissive Japanese who says “shikata ga-nai” (nothing we can do about it). He is suing the Japanese government in the Tokyo District Court over this affair arguing that Health Ministry bureaucrats have abused their power and are violating constitutional rights. His timing is good. Current Prime Minister Yukio Hatoyama has had enough of bureaucratic arrogance, and wants government ministers to exercise policy power. So, Goto may well win his case, which will be decided this week.
What happens if Goto loses his case? He might expatriate himself and his company to Singapore where he already has a branch. It would be ironical, leaving Japan to join the world. Kenko.com does not deserve this. It is not some backyard operation. Since it was created in May 2000, Kenko-com has grown on average 36 per cent a year. Last year it filled nearly 2 million orders, and achieved sales of 10 billion yen, about $100 million.
Let’s hope Goto wins. Stay posted for an update. But don’t expect to read the outcome in the Japanese media. They are also part of the iron triangle.
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